Tuesday, October 26, 2010

It's always interesting to see what Jim Cramer has to say about this industry. Last year, he had his infamous rant about "Equinox", and he still seems to think this month's 2% guidance drop from Equinix means the whole industry is done. Now, his latest idea is that Akamai is a logical takeover target.

In an article on TheStreet.com, Cramer claims that:

-Akamai Might be a Fit for HP Via 3Com. Really? 3Com struggled to gain market share in Ethernet, which was a technology invented by its founder. How well it could run a business where it presently has very little knowledge?

-Akamai Could Also Be a Fit for Cisco. Cisco actually invested in Akamai in 1999, before developing an alliance to fight the company in 2000. Moreover, it has been rumored to be building its own CDN service. Nonetheless, Cisco does have an unmatched record in the networking business turning proprietary technologies into dominant products. But that has never extended to services, and Cisco's track record in layer 4-7 technologies is mixed. But the biggest problem with offering services like this is that it would put Cisco in competition with its customers, especially AT&T. Additionally, it would create an awkward situation with Verizon, which currently resells Akamai. Would make very little sense for Cisco to do this, although I'm sure it would make Juniper very happy.

-Limelight Does Not Have the "Scale" that Akamai Does. More importantly, Limelight is spending twice as much per dollar of revenue than Akamai is on bandwidth. While Akamai has withstood many attempts by carriers to bundle bandwidth services with CDNs, Limelight would benefit far more from a partner that could knock down its bandwidth costs than Akamai would.

Cramer knows this kind of speculation will get Wall Street pondering the possibilities, but if any of these deals with Akamai actually ever happened, there would be an overdiversified company that would make him want to throw another chair across his studio.